Wall St., Main St. Look For Gold To Maintain Renewed Luster
Editor's Note: Kitco News has the best precious metals coverage in the world and is in the process of improving its mining news, so we want to hear from you. If you work in the mining sector please take this short survey to help us bring you the news you want.
Gold hit its weakest level of the year on Thursday but then went into comeback mode, drawing further strength Friday from a much smaller-than-forecast 20,000 rise in U.S. February nonfarm payrolls.
“After today’s figures, looks like $1,350 here we come!” said Afshin Nabavi, head of trading at MKS (Switzerland) SA.
Fourteen market professionals took part in the Wall Street survey. Twelve participants, or 86%, described themselves as bullish for the week ahead. There was one vote each, or 7%, for lower and neutral.
Meanwhile, 538 respondents took part in an online Main Street poll. A total of 274 voters, or 51%, called for gold to rise. Another 177, or 33%, predicted gold would fall. The remaining 87 voters, or 16%, saw a sideways market.
In the last survey, the biggest bloc of Wall Street voters was bearish while Main Street participants were bullish on gold for the current week. Around 11:10 a.m. EST, Comex April gold futures were trading 70 cents lower for the week so far at $1,298.50 an ounce.
“This is the bottom,” said Sean Lusk, director of commercial hedging with Walsh Trading, referring to April gold’s $1,280.80 low on Thursday, before the market bounced. “We are going to move higher. There are questions abounding about the global economy.”
He looks for some longs who liquidated to return to the gold market, particularly amid uneasiness with recent weakness in stocks.
ForexLive managing director Adam Button said that gold has found support, and risk aversion in the week ahead is increasingly likely. “That should keep a bid in gold,” he said.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is bullish on gold in the near term but sees limited gains in the medium term. He said that the weak nonfarm payrolls number will keep the Federal Reserve on hold for the foreseeable future, which will limit U.S. dollar strength.
“I think we still need to see more weak data to really push gold prices higher, but I think a peak in the U.S. dollar could push gold prices to $1,325 in the next few weeks,” he said. “To get above $1,350, you need to see Federal Reserve turn dovish, and I don’t think they are ready to take that step right now.”
Independent technical analyst Darin Newsom also said higher based on the charts.
“I’m looking for a Wave B (second wave) rally in gold’s ongoing secondary (intermediate-term) three-wave downtrend,” he said. “This week saw the April contract test support near $1,286 before rallying. This move should likely last a couple of weeks before turning down again.”
Jim Wyckoff, senior technical analyst with Kitco, looks for gains, saying the “market was technically oversold and due for a bounce, and the bulls still have the overall near-term technical advantage.”
Bill Baruch, president of Blue Line Futures, said that it makes sense to hold gold now as the global economy starts to weaken following disappointing trade data out of China and weak manufacturing data out of Germany.
Meanwhile, Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to pull back, calling the recent rally a retracement within a downward move. He listed key resistance for April gold at the 50-day moving average around $1,307 and the 20-day of $1,314.20.
Much will depend on whether the low number of jobs created in February turns out to be an aberration, Nedoss said.
“The wage number was positive,” he continued. “It wasn’t a totally disastrous report; let’s put it that way.”
Kevin Grady, president of Phoenix Futures and Options LLC, said he is neutral on the market for now. He sees the $1,305 level as resistance after it previously failed as support. He suggested Friday’s rally was a knee-jerk reaction to the soft jobs report, but pointed out that gold has tended to run out of buyers on rallies.
“This is a big short-covering rally as a result of that [U.S. jobs] number,” he said.